Maguire Properties sells Lantana Entertainment campus in Santa Monica
Beleaguered Los Angeles commercial landlord Maguire Properties Inc. on Wednesday sold one of its prized properties: the Lantana Media Entertainment Campus in Santa Monica, home to several prominent entertainment firms.
The deal, valued at more than $200 million, was the largest office property sale of the year in Los Angeles County, real estate brokers said.
Selling some properties such as Lantana and defaulting on others is part of a strategy by Chief Executive Nelson Rising to relieve debt and keep the company solvent. Maguire posted a $46.8-million third-quarter loss last month as the weak economy continued to drag down office rents.
Bidders were attracted to the stable of entertainment industry tenants who, to be together, pay some of the highest rents in the region, brokers said.
“I am here because it is the closest thing to being at a studio without actually being at a studio,” said action-film producer Larry Gordon. “It is a showbiz building.”
The 12-acre campus, comprising five rambling low-rise structures totaling about 530,000 square feet in a former industrial district on Olympic and Exposition boulevards, was bought by the Lionstone Group investment firm of Houston and the Recording Academy, the organization that hands out the music industry’s annual Grammy awards.
The Recording Academy bought the building at 3030 Olympic Blvd., which it has occupied as a tenant since March. Maguire Properties developed the three-story structure last year and signed the academy to a 15-year lease reportedly valued at more than $90 million.
Lionstone took title to the rest of the campus: a two-story, ivy-covered building completed in 1959, the Imax Corp. headquarters built in 2000 and two other office buildings developed by Maguire in 2007 and 2008. Tenants include Stefan’s at L.A. Farm restaurant, Anita Mann Productions and Dick Clark Productions Inc. Steven Bochco, the television producer behind “Hill Street Blues,” “NYPD Blue” and other series, has had offices there for four years and is now working on pilots, he said.
Lantana is run much like a studio, Bochco said.
“You can always get extra office space on an interim basis,” he said. “You can set up an editing room for four months and then you are out of there so you don’t have a lot of unnecessary overhead.”
Real estate broker Carl Muhlstein of Cushman & Wakefield described Lantana as “a studio without soundstages” that lets tenants avoid the typical studio hassle of queuing up to go through security every time they enter the gate. “It’s a kindler and gentler version.”
The sale was the largest of the year for office buildings in Los Angeles County, said Muhlstein’s partner, Andrew McDonald, acknowledging that there have been few commercial property deals since the credit crunch and recession hit.
“I think 2009 will go down as one of the most difficult times to transact leases and sales,” McDonald said. The pair represented Maguire in the transaction.
Buyer Lionstone is amassing a portfolio of properties catering to the entertainment industry. Among its properties in the region are Alameda Media Center, an office building in Burbank’s Media District and a former industrial building on Jefferson Boulevard in West Los Angeles occupied by ad agency Rubin Postaer and Associates, Walt Disney Co. and Sony Pictures Entertainment.
Maguire Properties is burdened with heavy debt, most of which it picked up during an aggressive expansion engineered by company founder Robert Maguire, who is no longer with the firm.
The company paid about $3 billion for 23 office buildings in Orange and Los Angeles counties in 2007, including a 52-story tower at California Plaza in downtown L.A. it acquired near the top of the market. Borrowing money for the heavily leveraged purchase was fairly easy, with capital markets still flush with cash at the time.
Among Maguire Properties’ best-known holdings is US Bank Tower in downtown L.A., the tallest building in the West.
The Lantana sale eliminated $176 million of debt obligations under two loans scheduled to mature next year, Rising said. It generated $19 million in net proceeds after paying off the loans.
“This is an extremely important transaction for the company,” Rising said. “The short-term debt maturities have been resolved, and we have added to the company’s liquidity. It’s an example of our intent to make our primary focus downtown Los Angeles.”
The Lantana deal has been in the works a long time and was expected, analyst Michael Knott of Green Street Advisors said.
“Maguire will now be out of the Westside and is apparently soon to be out of most of its Glendale assets,” Knott said. “This company seems headed back to its roots as a downtown L.A. landlord.”
Its stock, however, will probably linger far below its initial public offering of $19 a share in 2003, Knott said. Shares rose 5 cents Wednesday to $1.49.
